The Osborne Effect spooks Apple

Analysis Apart from the suicidal groans of the faithful, who've seen a decade's worth of evangelism flushed down the pan, Apple has emerged from its Intel migration announcement remarkably well. And with some good reason.

Perhaps because after almost 20 years of pressure to make the switch, it had the air of the inevitable. Computers feel more like appliances than they used to in the days when we hand soldered memory chips onto the motherboard or fiddled with DIP switches. A little, but not much - but they're cheaper and more disposable, and so there's less concern about what's really in the box.

There's a deeper reason why the switch was widely welcomed.

An irony, and one that hasn't escaped the rational Mac faithful, is that Intel's performance as a microprocessor supplier only looks good when compared to Apple's treatment at the hands of Motorola and IBM. Only at one brief moment in the past twenty years has Intel been able to boast the fastest chip in the industry. The last few years have included some notable disasters, and regular public flayings from top management to staff that the company needs to execute better. Intel's roadmap is piled high with car crashes: last year the company axed its next generation of Pentium 4-based chips for the server and desktop, and scrambled for an alternative. While an impressive performer, Pentium-M hasn't delivered the power savings originally hoped. And need we even mention Itanic? Last year Intel bowed to the inevitable and was forced to become AMD compatible, effectively blessing the x86-64 instruction set designed by its much smaller rival.

All this at a time when IBM consistently tops the TPC charts with its POWER4 and POWER5 processors, and, with the Cell, has the most talked-about chip in a decade. It's hard to say what would amaze a visitor who'd spent the past five years in a time capsule more: Apple switching to Intel, or Microsoft talking-up its PowerPC-based console, Xbox 2.

So Apple's switch to Intel isn't about performance, it's about dependability. There's little doubt that Intel will be making microprocessors in ten years time, and lots of them. While Apple doesn't wield the negotiating clout of a Dell, it still has options if it's unhappy with Intel as a supplier. Once you couldn't rationally expect IBM to focus its efforts elsewhere. The Playstation2 reached 100 million sales this month, and with Nintendo, Sony, and Microsoft all opting for IBM sourced chips you can hardly blame IBM for making this a priority. A source at IBM's Fishkill plant reportedly said that no more than 2 per cent of the fab's capacity was ever occupied by cranking out chips for Apple - and now they don't have to put up with screaming fits any more.

Adam's Apple?

However Apple's share price has sagged on the news, because the company still faces a painful migration. Apple has vowed to support PPC Macs for a long time, but that isn't the issue. Put simply, who in their right minds would buy a Power-based Mac now, or in the next eighteen months?

Unlike commodity PCs, Macs retain their resale value better, and Apple owners keep their machines longer, which makes for a more enduring investment.

Casting back five years, to the summer of 2000, we see Apple was selling machines which still run Mac OS X very capably today. The dual 500Mhz PowerMacs and the 450Mhz G4 Cube all need stuffing with RAM, but thanks to the performance improvements in OS X Panther and Tiger, these five year old machines do the job.

Who, buying a PPC Mac this year, will be able to say the same of their machine in 2010?

The issue is that developers and device manufacturers need to support a diminishing base of users. In 2010, the case for cranking out a legacy driver for long-dead hardware will be hard to make. There's little Apple can do about this, except introduce new machines as quickly as it can.

This is called the Osborne Effect: announcing a successor without being able to ship it. It led to the collapse of his pioneering company. "You'll note however that people do still do this these days, possibly through total ignorance of Adam's existence," wrote John Lettice when Osborne died two years ago. It's unlikely that Jobs has forgotten his former rival, and even more unlikely that the transition will be as bumpy. The original Osborne Effect from pre-announcement to filing for bankruptcy took just six months. These days the computer industry is a more mature business, Apple has software and iPods to sell, and of course, has billions in the bank with which to cushion the impact. But how far sales fall as the first Intel-based Macs approach remains to be seen.

Bargain basement

Which brings us, with a slightly too slick link, to Apple's other issue. A consequence of choosing a commodity component supplier is that the family comes along for the ride, too. By removing an important differentiator, will Apple be able to trump other commodity factors such as price? Once the x86-Macs appear, will aesthetics and security be enough to persuade the buyer that the premium is worth it over the beige box?

Many PC OEMs thought they could succeed with technical differentiation, and most went bust trying. The public unarguably wants cheap Dells. Does this leave enough room for Apple?

We saw a dry run for these kind of arguments when the Mac Mini was unveiled in January. At $499 it was compared to Wintel PCs which came with the convenience of a monitor, keyboard and mouse.

"There are plenty of people who would pay a premium for a computer that didn't look like an old-fashioned PC. The case-mod movement has been indicating this trend for a decade. A good portion of the buyers today would like to see something around their desk that wasn't a beige box with all the appeal of 1977 Plymouth," he writes.

Dvorak has railed against the conservatism of the US public for years (with some style, for example, in his Bland Americans column) and let's hope he's right. The dress sense may eventually take a turn for the better, too.

If not, Apple does have other cards. There are many miserable aspects of the modern computer experience, and security is one where Apple users worry less than Windows users. (For this reporter, it's more important than the design). But Apple may have a third factor in its favor, once the Intel Dells and Intel Apples are compared side by side, and it's a bonus it has never had before.

The gaming scene on the Mac today resembles a desert, because as one reader reminded us, Microsoft has tied the major publishers into the DirectX APIs . If Apple can contrive to create an optimal Windows environment - effectively a DirectX run-time - that plays Windows games at near-good-enough performance, it will give potential buyers a powerful reason for paying the Apple premium.